Canexus Corp assets would attract plenty of buyers

Canexus Corp. should consider selling its chemical and midstream assets in order to maximize shareholder value, CIBC World Markets says in a new report.

Analyst Jacob Bout believes the company’s midstream assets could fetch between $400-million and $620-million, and its chemical business may be worth between $810-million and $1.368-billion.

“While the stock lost almost 50% over the course of the last year as a result of cost overruns at its North American Terminal Operations (NATO) near Bruderheim, lowered expectations and subpar earnings results, we still believe Canexus has significant potential in the right hands,” Mr. Bout told clients, reiterating a market weight recommendation and $6 price target on the stock.

His sum-of-the-parts valuation puts Canexus shares in the $4.40-to-$8.80 range.

The analyst highlighted several Canadian energy infrastructure companies that may be interested in the assets, including AltaGas, Enbridge, Gibson, Inter Pipeline, Keyera, Kinder Morgan, Pembina and TransCanada, since all of them own land in the Redwater/Fort Saskatchewan/Edmonton area that is likely capable of hosting a NATO-like facility.

However, Mr. Bout thinks the window of opportunity for Canexus to sell its midstream assets is very short since companies interested in buying them will likely build their own facilities if the sale process drags on.

He also believes MEG Energy and Cenovus Energy Inc., producers that are currently customers of the NATO terminal, as well as private-equity companies such as KKR and Riverstone, may also be interested in acquiring Canexus’ NATO facility.

The analyst listed several potential buyers for Canexus’ chemical business, including Superior Plus Corp., Chemtrade Logistics Income Fund, other players in the sodium chlorate business and private-equity firms.

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